U.S. Chamber of Commerce v. City of Seattle
890 F.3d 769 (2018)
Rule of Law:
For a municipality's ordinance that authorizes price-fixing by private parties to be shielded from federal antitrust law under the state-action immunity doctrine, the state must have a "clearly articulated and affirmatively expressed" policy authorizing such conduct, and the state itself (not the municipality) must actively supervise the private parties' anticompetitive actions.
Facts:
- The City of Seattle enacted Ordinance 124968, which authorized for-hire drivers, operating as independent contractors, to engage in collective bargaining with 'driver coordinators' like Uber, Lyft, and Eastside.
- The Ordinance allows these independent drivers, through an 'exclusive driver representative,' to negotiate the 'nature and amount of payments to be made by, or withheld from, the driver coordinator to or by the drivers.'
- Driver coordinators such as Uber and Lyft provide ride-referral services to independent drivers through smartphone applications in exchange for a technology licensing fee, which is a percentage of the passenger's fare.
- Drivers who use these platforms are independent contractors, not employees; they are free to choose when, where, and how long they work, and can use multiple platforms simultaneously.
- The Ordinance creates a process where, if a majority of a company's drivers vote for representation, an 'exclusive driver representative' is certified to negotiate on behalf of all drivers for that company.
- Any agreement reached between the drivers' representative and the driver coordinator must be submitted to the City of Seattle's Director of Finance and Administrative Services for review and approval.
Procedural Posture:
- The Chamber of Commerce of the United States of America and Rasier, LLC (collectively, 'the Chamber'), sued the City of Seattle in the U.S. District Court for the Western District of Washington.
- The Chamber alleged the City's ordinance was preempted by the Sherman Antitrust Act and the National Labor Relations Act (NLRA), and sought a declaratory judgment and an injunction.
- The City of Seattle filed a motion to dismiss the complaint.
- The district court granted the Chamber's motion for a preliminary injunction.
- The district court subsequently granted the City of Seattle's motion to dismiss, holding that state-action immunity protected the ordinance from antitrust claims and that the NLRA did not preempt it.
- The Chamber, as appellant, appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit, with the City of Seattle as appellee.
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Issue:
Does the state-action immunity doctrine exempt a municipal ordinance from preemption by the Sherman Antitrust Act when the ordinance authorizes price-fixing by private, independent-contractor drivers, and the state itself does not actively supervise the resulting anticompetitive conduct?
Opinions:
Majority - Judge Milan D. Smith, Jr.
No. The state-action immunity doctrine does not exempt the Seattle ordinance from preemption by the Sherman Act because the City failed to satisfy the doctrine's two-part test. First, there is no 'clearly articulated and affirmatively expressed' state policy in Washington authorizing municipalities to permit collective price-fixing by independent for-hire drivers. The state statutes granting cities authority to regulate 'for hire transportation services' do not contemplate or foreseeably result in the regulation of payment contracts between drivers and ride-referral companies, which is a distinct market. Second, the 'active supervision' requirement is not met. When a municipality's regulation involves anticompetitive conduct by private parties, the state itself—not the municipality—must actively supervise that conduct. In this case, the State of Washington plays no role in supervising the price-setting agreements authorized by the Ordinance; supervision by the City's Director is insufficient. The court also held that the ordinance was not preempted by the National Labor Relations Act (NLRA) because Congress's exclusion of independent contractors from the NLRA's coverage did not prevent states or municipalities from regulating them, and the plaintiff failed to show the drivers were 'arguably' employees under the Act.
Analysis:
This decision significantly impacts the ability of municipalities to regulate the 'gig economy' and bolsters the position of platform-based companies like Uber and Lyft against local labor regulations that may create antitrust concerns. The court's strict application of the state-action immunity doctrine clarifies that cities cannot independently authorize private actors, such as independent contractors, to engage in price-fixing without explicit enabling legislation and active supervision from the state. The ruling effectively requires that any effort to grant collective bargaining rights to independent contractors must originate at the state, not the local, level, thereby limiting the scope of municipal power over new economic models.
